Blow to air traffic control plan

The future of the National Air Traffic Service hangs in the balance today as the Civil Aviation Authority rules that it cannot raise the fees it charges airlines.

The move means the debtladen air traffic controller now depends completely on its banks' goodwill for survival, raising further doubts about the Government's decision to privatise the service.

The CAA was announcing today that it had rejected Nats' request to be allowed to raise its charges by about 25 per cent over four years.

The extra revenue - up to £200 million - would have helped Nats reduce its £700 millionplus debt mountain and allowed it to proceed with a £1 billion investment programme for the next 10 years, aimed at increasing the amount of traffic it can cope with.

But the CAA will not stop Nats raising its fees if the airlines agree on the grounds that it is in their own best interest to have a financially secure air traffic controller.

However, the airline watchdog will insist that the Airline Group, the consortium which includes British Airways and owns 46 per cent of Nats, is not involved in this decision.

The ruling will be the second blow for Nats this week. It learned yesterday that outsourcing group Serco had abandoned negotiations that would have seen it inject £50 million into Nats. The Government has promised a further £50 million if such an investor can be found.

Nats, it is believed, hopes to conclude a deal with airports operator BAA over a £50 million investment by the end of summer.

The CAA was expected to justify its decision by saying that the impact of 11 September on Nats' business was not exceptional enough to warrant an automatic increase in charges.

But Nats chief executive Richard Everitt said traffic revenues had fallen 17 per cent since then. "I am astonished that the CAA has not accepted that a price increase is justified."